clock menu more-arrow no yes

Filed under:

1-800 Contacts' shares fall as firm cries foul

NEW YORK — Shares of 1-800 CONTACTS Inc. fell Wednesday after the company reported disappointing third-quarter results, blaming "unfair" trading practices.

1-800 CONTACTS shares closed down $3.60, or 21.5 percent, at $13.18 on the Nasdaq Stock Market. Shares traded as low as $12.60. The 52-week low of $16.51 was set Nov. 4.

The Draper-based company late Tuesday reported a loss of 4 cents a share for the third quarter, down from earnings of 10 cents in the same period a year ago. It missed Thomson Financial estimates for earnings of 6 cents a share.

1-800 CONTACTS complained that eye doctors are prescribing contact lens brands that only doctors sell.

"The primary threat to the very existence of our business has always been that, unlike most other health-care providers, eye doctors are permitted in all 50 states to sell the products they prescribe and profit from filling their own prescription," Chief Executive Jonathan Coon said in a press release.

1-800 CONTACTS said that addressing the "doctors only" lenses issue is its top priority and will reduce its advertising spending by $10 million to $12 million in 2006. The company said it will use the proceeds from the reduction to fund initiatives toward that goal and to reduce its debt.

KeyBanc Capital Markets analyst Jeffrey S. Stein, who downgraded the company to "underweight" from "hold," said the chances of 1-800 CONTACTS resolving the issue directly with lens vendors has likely diminished.

For its fourth quarter, 1-800 CONTACTS now sees U.S. retail net sales of $50 million to $51 million with operating income of $3 million. For fiscal 2005, the company expects net sales of $220 million with operating income of $15 million.